Everything You Should Know About Bitcoin Mining and Blockchain

Published on: 2017/08/31

Chitra

Abstract

Learn more about the Bitcoin mining process by which this cryptocurrency came into existence and how the Blockchain technology fits into it all.

Interest Category

Bitcoin mining, cryptocurrency, Bitcoins, Blockchain

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What is Bitcoin mining?

Bitcoin mining is the core of the Bitcoin network. Bitcoin transactions are recorded in public ledger called a blockchain. Mining is the process of recording transaction in this public ledger that belongs to Bitcoin. Mining is done by computers, the main function of Bitcoin Mining is to confirm the Bitcoin transaction. Mining is carried out by securing the network and processing the transaction.

To understand this better, you should be knowing these important terminologies and functions

Blockchain

The blockchain is the technology that is used by Bitcoin and cryptocurrencies. The blockchain is nothing but a distributed ledger. Blocks are the records that are constantly added to the ledger. Every block that is recorded as a time and link to the previous block. This forms a chain. All the blocks are encrypted. Everyone in a network has a copy of the database, but to make an entry one must have “private key”.

The public key and private key

The public key is like an email address of a person. The private key is like a password. To add a new block to the distributed ledger or to initiate a transaction, you must have a private key. As long as the private key is held a secret, nobody can manipulate the ledger.

The process of Bitcoin Mining

Processing a Bitcoin transaction involves solving a computational problem in blocks. Blockchain is the technology that underpins all the cryptocurrency transaction. Blockchain technology allows a user to send or receive money without revealing the identity.

Bitcoin mining is done by specialized computers with the main role being, securing the network, processing Bitcoin transaction and for this, the miners are rewarded with transaction fees and newly-created Bitcoins. Mining involves solving mathematical problems which is a called a hash ( a 64 digit hexadecimal number). The hash consists of a set of alphanumeric digits which is not easy to understand. To get a transaction right, one must have a high rate of accuracy or high hash rate.

Graphics processing Unit miner or an ASIC or application specific integrated circuit miner is used to mine cryptocurrencies. This must cost more than $500 and can consume a lot of energy. So, for any individual, mining Bitcoin is not easy. GPU miner is not an efficient way to mine cryptocurrencies and it is considerably an economic solution for mining. GPU mining stations, although not efficient, can be set up at home with a decent investment.